Choosing the best way: IT outsourcing or in-house team?

Andrew Volchek
Andrew Volchek, CEO, Co-founder at Arateg
Published on Feb 17, 2020 in App Development



Before building a digital solution, you need to choose between two options: hiring in-house specialists or a software development outsourcing company. As both ways present various pros and cons related to technical expertise, costs, communications, data security, and level of control, it may be quite a difficult decision.

In this article, we’ve compared outsourcing with an in-house team so that you can define the best variant exactly for your project. Learn when it’s better to rely on a third-party contractor and when—work with in-house experts. 

 

What is in-house software development?


In-house development is the use of the company’s resources to build a digital solution or perform other software-related tasks in accordance with specific requirements. Here a business has to spend time and money assembling a team of specialists who possess the necessary expertise for implementing a project.

Choosing this option, make sure that resources are sufficient and infrastructure is strong enough to create a technological product on your own.

What is software development outsourcing?


Simply put, outsourcing means task/project delegation to a third-party IT service vendor instead of doing it in-house. Today a growing number of businesses worldwide are using this approach because of lower costs, high narrow expertise, team diversity, and full-cycle product development. 

According to an Statista's report, the IT outsourcing market amounted $66.5 billion. In 2021, its turnover is anticipated to reach nearly $96.7 billion. Technavio’s analysts concluded that the rising need to optimize business processes is one of the key drivers for quick market growth. They also projected that its size will increase to $409 billion by 2022.



Source: Global IT Outsourcing Market 2018-2022 by Technavio

Top 3 advantages of in-house developers


1. Enhanced communication

When in-house specialists are from the same country as you are, they are likely to have the same cultural and language background. This allows the client to avoid misunderstandings and not to worry about possible cultural differences.

Designers, engineers, and business analysts can communicate with you and your employees in person, meetings can be arranged more quickly. As a consequence, some issues will be resolved faster.


2. More rapid changes

Having all specialists at hand, it’s easier to implement changes adding new functionality, making improvements, fixing bugs and errors.


3. A higher level of control

With direct conversations and the ability to gather urgent meetings, the customer has a higher level of control. Since in-house professionals work in the same office within the same schedule, it’s more convenient to coordinate product creation.

Top 3 drawbacks of in-house development


1. High cost

When employing professionals on your own, a business has to pay for many other things besides work activities: vacation days, sick days, equipment, software licensing, health insurance, corporate events, training/onboarding programs.

As it’s pretty challenging to find a relevant candidate, the goal is to keep specialists interested and motivated. Bonuses, free meals, social package help achieve it but result in additional expenses. On top of it, you’ll have to pay employees even when there are no tasks.

However, if the product development is put on pause or the first stage is ended and the second one is far away, a software house can switch a specialist to another project.


2. Risk of staff turnover



Despite cool perks and strong motivation, employees may leave you for some reason. After investing money and effort in their recruitment and adaptation, you’ll need to invest in the search process again. As a consequence, system development can be slowed down.


3. The lack of narrow expertise

When being limited to region/city, it may be difficult to engage a qualified specialist with experience in a certain field (e.g., CRM web applications, Internet of Things platforms, etc.) or technology (e.g., Python, Ruby, JavaScript, Elixir).

This is a frequent problem when aiming to extend the team/scale the app, employ an innovative programming tool, make an innovative product, or help the client solve very specific challenges. Browsing an IT service provider globally, you dramatically increase chances to find one that will cover all gaps.

Top 5 advantages of IT outsourcing


1. Cost reduction

Cost savings is one of the main benefits provided by IT outsourcing. Avoiding taxes, talent recruitment, team motivation (e.g., paying bonuses and other perks), staff training, and software/hardware licensing, you significantly reduce expenditures.

Furthermore, the level of wages significantly varies by country/region. An average yearly software engineer salary in the USA is $73,117 (according to Techworld’s report published on October 2, 2019) and in Belarus—$20,400 (statistics by dev.by, an official media source about the IT industry), which is 3.6 times lower!


If your startup or enterprise is based in the United States or another country with high wages, there are many destinations offering competitive rates. Look for an outsourcing development partner in your price range paying attention to portfolio and clients’ testimonials.


2. Flexibility

A third-party contractor can simply adjust the team size to meet the changing project needs. If you decide to complement an e-commerce store with a mobile application or add some features to an MVP, you won’t have to seek new specialists. Since the hiring and onboarding process takes a lot of time, such a high flexibility level is just impossible with an in-house software development team.


3. Diverse team expertise

The creation of an app/website requires the efforts of not only frontend and backend engineers but UI/UX designers, testers, business analysts, project managers, and sometimes even a marketer.

An IT outsourcing market offers a huge pool of talents in various sectors and technologies. You can browse different companies from all over the world and start cooperating with one that fully suits your requirements regarding price, specialization, technology stack, time zone, etc.

In a software development house, specialists are engaged considering role, skills, and experience. However, you can request resumes and hold interviews with them to ensure they have the necessary skills and knowledge.


4. No recruitment hassle

Recruitment of a qualified specialist generally takes from a few weeks to two-three months. As our practice shows, sometimes a hiring process—searching for relevant applicants, connecting with them, holding multi-stage interviews, analyzing results, etc.—may require a year and a half while a perfect candidate joins the company.

To find a reliable agency with many professionals on board that has already helped many businesses is much faster than assembling an internal team. Relieved from human resources and staff training issues, businesses can save 2-4 months on building and launching custom-made applications.


5. Fast time-to-market

You don’t have to establish software engineering processes from scratch involving project management, time tracking, design, deployment, and testing. Hence, when delegating product creation to a third-party vendor, work starts once an NDA (non-disclosure agreement) is signed.

Here at Arateg, for instance, we use continuous integration and continuous deployment (CI/CD) for accelerating app release cycles, code review, manual and automated testing for delivering higher quality, Slack for internal communications, Jira and Confluence for effective task management.

For video conferences and calls we employ Zoom, Google Meet, and Google Hangouts. These tools and practices enable us to build digital solutions faster as well as simplify daily work.

Top 3 drawbacks of outsourcing


1. No face-to-face communication

When addressing technical challenges to a third-party, you can’t reach the project team and company’s leaderboard in person. All communications are carried out via phone calls, messengers, or emails.

Certainly, trusted software development firms know how to overcome these issues. They hold everyday/weekly meetings via Google Meet (or another video conferencing app), constantly send reports, and show intermediate project results.


2. Limited control over a remote team

When the team is not working in your office or city, you may feel that control is limited. Fortunately, software development outsourcing companies use time tracking, project management, and CRM systems to provide the highest transparency level possible.

The market is full of convenient solutions like Jira, Redmine, Trello, amoCRM, and HubSpot. If you’ve got used to some of them, just ask the vendor to employ it during cooperation.


3. Different time zones

If the customer’s and IT companies are based in different time zones, it’s difficult to arrange an urgent meeting in 30 minutes. If necessary, a software development partner can adjust business hours to the client's working schedule. However, if the time difference is three hours or less, you may not even notice it.

It is noteworthy that if your firm is located, say, in San Francisco, the team in Belarus will perform tasks before the deadline as they are literally in the future.

In-house developers vs IT outsourcing


Sometimes it’s pretty simple to choose what way to go—in-house or outsourcing—for example, when aiming to build a mobile application quickly and within a budget. However, what should you do in other situations? Don’t worry, we’ve prepared 2 checklists that will help you make the right decision.

When should you choose an in-house team?


Despite some drawbacks, this approach offers plenty of benefits. It is a perfect solution in the following cases:

1. The purpose is to build a quality product and have your own team (e.g., for future projects), money doesn’t matter.

2. You’re planning a long-term project, for instance, the digitization and maintenance of internal processes. Or you’ve decided to create a software system and sell it to customers.

3. A company has experts, who suit the project requirements by skills and knowledge. Or it will have no difficulty to fill the gaps.

If some of these points match your situation and you are not tied to time or budget, look for in-house experts to build a tech product. But before, see what outsourcing is as well as what pros and cons it provides.

When should you choose IT outsourcing?


Today small, medium-sized, and large businesses outsource their projects to avoid expenses associated with recruitment, training and managing the team. With a view of launching the app faster and with no quality loss, they analyze the company’s portfolio, customer reviews, as well as consider the IT service provider’s achievements.


Outsourcing will be a great option when:

  • Your core competency isn’t IT
  • The own software experts are totally busy with other projects and won’t be free soon
  • You want to cut software development costs
  • You want to reduce time-to-market
  • There is no desired expertise within your organization/region



If you have at least one match, choose a software house that has already helped other clients meet industry-specific requirements. Look for a third-party contractor in B2B review and rating platforms such as Clutch, GoodFirms, The Manifest, or AppFutura. They contain information about the company’s specialty, services, reviews, ratings, hourly rates, and more.

Closing thoughts


Both outsourcing and in-house development have pros and cons. If you’re going to hire in-house specialists, make sure there is enough time for their search, hiring, and onboarding. When the main objective is to quickly launch the product, it’s better to delegate software-related challenges.

Choosing an IT service provider, pay attention to the company’s reputation (testimonials, ratings, achievements), expertise and specialization (types of apps and websites created before, technology stack, industries served), communication flow (how quickly the vendor responds, is it comfortable to discuss technical issues, etc.), and other factors. Fortunately, some obstacles such as different time zones and limited control can be easily overcome.

If you have questions about this topic or need a consultation, you’re welcome to contact Arateg team. Having extensive experience in delivering tailor-made mobile and web solutions, we’ll be glad to answer them and offer meaningful recommendations.


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About the author
Andrew VolchekCEO, Co-founder at Arateg

Andrew is a Co-founder, CEO at Arateg Custom Software Development Company, focused on helping SMEs and startups work smarter, grow and increase productivity with the help of modern technologies. Contact him via email to discuss how to develop your IT...

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